Didn't register for VAT soon enough!

Didn't register for VAT soon enough!

Didn't find your answer?

I have just realised that I perhaps should have registered some months ago depending on how the turnover figure is calculated.
I only do consultancy work but incur travel and accomodationn costs. My invoices to my clients show my consultancy fees and my expenses separately. (I do not make any profit on my expenses)
My consultancy rolling turnover has never exceeded 57k but with expenses added to it it started to exceed 61k in November 05
My questions are-
1 should I have registered in Nov 05?
2 if 'yes' and I register now will I be able to charge my VAT registered clients the VAT that I may have to pay?
3 will I be able to claim the VAT on my expenses since then.

My clients will be no worse or better off - they will get a VAT bill and both pay and reclaim it.
I will actually be better off because I will gather the VAT on my services and pay it to HMRC AND get the VAT back off my fuel, accommodation etc.

Or will I be shot at dawn!?!

Regards

MI SC
MI SC

Replies (3)

Please login or register to join the discussion.

avatar
By User deleted
05th Jan 2007 13:39

A few points to watch
I tend to agree with what Jessica has said, but...

1) If it was November 2005 (not 2006) that you exceeded the registration limit (by the way it was then £55,000 not £61,000 like now) then you are into the 10% penalty bracket [VAT notice 700/41]
http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageLibrary_PublicNoticesAndInfoSheets&propertyType=document&columns=1&id=HMCE_CL_000120

2) The penalty is 10% of the VAT liability from registerable date (ie. 1 Jan 2006) to date of notifying a liability to register HMRC.

To mitigate the penalty make sure you maximise your input tax claim within the penalty period, not forgetting (as easily overlooked in these circumstances) :-
a) VAT on Capital Expenditure and stock of goods / stationery physically in possession at 1st January 2006, where a VAT purchase invoice is held.
b) If a Ltd Co, and if car mileage allowances are claimed, the VAT reclaim on the fuel element of the mileage allowances claimed
c) VAT on services upto 6 months prior to 1st January 2006
d) If you are about to incurr significant capital expenditure with VAT included, then buy the item before you notify registration.
By following the above guidelines your penalty will be reduced, in effect, by 10% of the input VAT involved.
Compute your VAT liability on a cash accounting basis - reduces the penalty by 10% of (VAT on debtors minus VAT on creditors).

With regard to recovering the uncharged VAT from your customer(s) this, if not covered contractually, will be a goodwill matter between customer and supplier. If there is a reasonable working relationship and the supplier can recover the un-charged VAT, then in practice I've not seen this to be a problem.

Thanks (0)
avatar
By User deleted
05th Jan 2007 22:27

the threshold was £60,000
In Nov 05, the registration threshold was £60,000, not £55,000.

Thanks (0)
avatar
By neileg
26th Jan 2007 09:31

Splitting
If you are a sole trader then it is you that is registered, not the business so splitting has no effect. You could make one business a partnership or a limited company.

The problem is that HMRC have the power to disregard the split and aggregate the businesses, anyway, so it doesn't achieve anything.

Thanks (0)